The Economic Case for Medicare-For-All

The economic case for single-payer reform—e.g., Medicare-for-All—is compelling. Two long-time advocates of a single-payer plan, physicians Steffie Woolhandler and David Himmelstein, have been making that point over 30 years. They are co-founders and remain active in Physicians for a National Health Program.

A primary issue is the expense of private insurance companies that are not involved in single-payer plans. The federal government is the insurer, the single-payer. Woolhandler and Himmelstein emphasize that in 1917 the overhead from private insurers averaged 12.4 percent compared to 2.2 percent in traditional Medicare. Eliminating insurance companies (as in basic Medicare) and reducing overhead to Medicare’s level would have saved approximately $220 billion.

Single-payer reform could also sharply reduce billing and paperwork costs for physicians, hospitals, and other providers. For example, by paying hospitals lump-sum operating budgets rather than forcing them to bill per patient, Scotland and Canada have held hospital administrative costs to approximately 12 percent of their revenue versus 25.3 percent in the United States. Simplified, uniform billing procedures could reduce the money and time that physicians spend on billing-related documentation.

Under single-payer reform, shifting all payments for medical care to the federal government would increase the outlay substantially from the government. On the other hand, the total amount spent on health care would decrease.

In 2018, the average annual family health insurance premium for employer-based insurance was almost $20,000, with about $5,400 of that premium paid by the employee, according to the Kaiser Family Foundation. In addition the employee must pay the deductibles and make co-payments and other out-of-pocket medical payments.

A 2018 Vox analysis of data from the New York Health Act found that new taxes levied to pay for health care would probably replace the same amount of money spent on health care premiums, whether the employee or the employer covers that cost.

A summary of studies since 1991 supports the economic advantage of single-payer.

• From the General Accounting Office, June 1991:
o “If the US were to shift to a system of universal coverage and a single payer, as in Canada, the savings in administrative costs [10 percent of health spending] would be more than enough to offset the expense of universal coverage”

• From the Congressional Budget Office, December 1991:
o “If the nation adopted…[a] single-payer system that paid providers at Medicare’s rates, the population that is currently uninsured could be covered without dramatically increasing national spending on health. In fact, all US residents might be covered by health insurance for roughly the current level of spending or even somewhat less, because of savings in administrative costs and lower payment rates for services used by the privately insured.”

• Economic Policy Institute, June 1998:
o “In the model presented in this paper, it is assumed that in the first year after implementing a universal, single-payer plan, total national health expenditures are unchanged from baseline. If expenditures were higher than baseline in the first few years, then additional revenues above those described here would be needed. However, these higher costs would be more than offset by savings which would accrue within the first decade of the program.”

• The National Coalition on Health Care, August 2005:
o This fiscal analysis of the impact of four scenarios for health care reform found that the single-payer model would reduce costs by over $1.1 trillion over the next decade while providing comprehensive benefits to all Americans.

Additional savings could come from adopting the negotiating strategies that most nations with national health plans use, which pay approximately one half what we do for prescription drugs. Further, the potential health benefits from single-payer reform may be more important than the economic ones. Being uninsured has mortal consequences. Covering the 26 million persons in the United States who are currently uninsured would probably save tens of thousands of lives annually.
If the economic and health benefits are so obvious, what is the holdup? It is politics, pushed by those favoring corporate interests, the insurance and the pharmaceutical industries, on the one hand, and those who think that major problematic issues like our medical care “system” can be fixed with minor tinkering.